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FINANCIAL PLANNING FOR DISABLED PARENTS AND SPECIAL
NEEDS BENEFICIARIESDECEMBER 12, 2016
FPANY’s Public Awareness Committee in Partnership with NYU School of Professional
Studies
New York Public LibraryScience, Industry and Business Library
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All information contained in these pages is for informational purposes only. It should not be considered legal advise. Please consult an attorney before taking any steps based on this information.
All information contained in this presentation is for informational purposes. The presenting attorney does not represent the information contained herein is accurate or appropriate for your personal situation.
All financial advisors are committed to fiduciary standard. Professionals are bound to adhere to the Certified Financial Planner Board of Standards and Ethics and/or the Financial Planning Association Standards depending upon their designation.
The information contained in this document was provided on a pro bono basis. No compensation was obtained in exchange for services provided either directly or via a third party.
Disclaimer
Why Are We Here Today?
1. Discuss differences of NEEDS-BASED versus ENTITLEMENT programs
2. Understand gov’t. programs regarding HEALTH and MONEY
3. Determine how to optimize family assets while using these programs
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SSDI and MEDICARE: “Entitlement Programs” – you paid for it, you
get it Separately withdrawn from your paycheck: 15.3%
You pay half, your employer pays half
SSI and MEDICAID: “Needs Based Programs”
(1) Must have the physical / mental need (2) “Means Tested”: must meet asset & income limits
Comes out of your general tax dollars
Entitlement v. Needs Based Government Programs
Social Security: Disability
There are 2 types of Social Security Disability programs: SSDI: “Social Security Disability Income” SSI: “Supplemental Security Income”
These programs provide $ MONEY $
These are NOT Social Security Retirements SSDI eventually reverts to SS Retirement SSI does NOT (usually)
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SSDI – “Full” Disability Paid into SS for 40 fiscal quarters
Max Benefit: $2,639 in 2016 Benefit base on income history
No limit on how much assets you have Income
No limit on “passive” income You can still “earn” < $1,129 / month in income
No government requirements how it must be spent TIP: If you are nearing 40 quarters, try to keep working before
applying: SSDI has less limits than SSI (20 of those quarters in past 10 years)
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SSI – “Limited” Disability Paid into SS for LESS than 40 quarters
Max Benefit: $820 / month in 2016 Fed max is $733, NY max is $87 Benefit based on living arrangement & other income
Limitations: Assets of only $2,000 Excess must be held in Supplemental Needs Trust
Spending Requirements Food & Clothing
Automatic Medicaid eligibility
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Medicare A HEALTH care program:
40 quarter qualification you can qualify for Medicare 2 years after you are declared disabled (which takes 5 months)
Parts PART A: Inpatient Hospital Care
“Eligible” people pay during working years; pay up to $407 per month if “Ineligible” PART B: Supplemental Medical Insurance
Pay $104.90 - $335.70 per month PART C: Managed Care
Cost varies by plan PART D: Prescription Drug Benefits
$0-$50 per month; cost varies by plan; higher income consumers often pay more
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ACTIVITIES OF DAILY LIVING (“ADLs”) Transferring (Walking) Bathing Dressing Eating Continence Toileting
MEDICAID:Activities of Daily Living
The type of Medicaid benefit you receive determines “look back” periods (I.e. the penalty for transferring assets)
Home / Community Care
Personal care, physical therapy, home health care and home health aid services; clinical or out-patient basis; includes physicians, dentists, pharmaceutical, nursery
Institutional CareHospitals, medical facilities, nursing homes Does NOT usually pay for “Assisted Living facilities”
Types of Medicaid
You have to give away Money (gifting)
AND / OR
You have to give up control of spending
REMEMBER: This is a “Needs Based” program, NOT an “Entitlement” program; if you have no financial need you do not qualify
Why Do People Hesitate?
ASSETS$14,850 in the recipient’s nameEXCEPTIONS:• “Burial Allowance” of $1,500• Life Insurance: $1,500 cash value• Personal Property (unlimited)• Client’s House (ONLY for Home & Community care) IF UNDER $828,000• Supplemental Needs Trusts• Medicaid Trusts
•Retirement Plans (IRAs) are exempted from assets if they are in “payout status” (Required Minimum Distributions or Separate and Equal Periodic Payments if recipient is under age 59 ½), in which case payments are included in Income
MONTHLY INCOMEHOME CARE: $825 per month• Any excess income must go to the recipient’s “SPEND DOWN”o Often goes to a “POOLED TRUST”
INSTITUTIONAL: ALL of the recipient’s monthly income in excess of $50 must be paid to the Nursing Home to offset Medicaid payments
Financial Eligibility Requirements for an Individual
Department of Social Services and Medicaid impose a “Lookback Period” for transferring assets outside of the proposed recipient’s name
Home & Community Care
3 MONTH Lookback
One Strategy:Transfer all financial assets (except $14,850) to a non-spouse, wait one month for bank statements to be updated, then apply for Home Care.
DOWNSIDE: If the recipient needs Nursing Home care… the 5 Year Look back rule applies
Nursing Home5 Year Lookback Period, and the Homestead can be attached by
MedicaidEXAMPLE: In January, 2011 Mary transfers her Coop and most of her assets to her son Joe (total of $280,000), and applies for Home Care. In March 2015 Mary goes to a Nursing Home. She failed to make the 5 year Lookback (4 years & 2 months). Nursing Home Care in Manhattan equals approximately $12,000 per month.
$280,000 (amount gifted) = 23.3 MONTH $12,000 (monthly benefit) “Penalty Period”
Medicaid will not pay Mary’s Nursing Home benefits for 23 months. ..and Joe is liable. Joe should have paid for Mary’s care for 10 more months to get through Mary’s Lookback Period.
Transfer Penalties
Healthy Married Couple: When some aging illness is diagnosed or no earlier than 70s
Single Person with No Kids: NEVER (Private pay caregiving is better than Medicaid care)
Disabled Family Member: Immediately
Disabled Minor Family Member: Prior to them attaining age 18
When To Start Medicaid Planning?
Now We Know the Programs (1. Needs v. Entitlement)
AndNow We Know the Which Are Which
(2. Health v. Wealth)
Now We Focus on the Planning(3. How to Help Family Members)
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Probate v. Non-Probate
“Operation of Law” Transfers Probate / AdministrationAnything with a “Beneficiary Designation” Because we know who it goes to at death
•Jointly Owned Property•Some Business Agreements•Retirement Plans•Life Insurance•Transfer on Death [“TOD”] accounts•Trusts
All you need is a Death Certificate to collect these (if you are the beneficiary)
This is what transfers through your WILL or Intestacy
Because we don’t automatically know who it goes to at death
This includes all property not listed under “Operation of Law”
(I.e. everything else)
2 Legal Procedures:• If there is a valid Will =
“Probate”• If NO Will = “Administration”
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YOU HAVE A WILL WHETHER YOU HAVE
WRITTEN ONE OR NOT
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Intestacy: When there is NO Will
An Administrator is named and MUST deliver estate property as follows:
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What You Don’t Do, or Do Wrong, HURTS Your Disabled Beneficiary19
- Examples:- No Will = No choice of who gets what- Improper Beneficiary Designation = Leaves funds
to beneficiary outright- Worst: Leave Nothing to Beneficiary out of fear!!!
- The Result:- Beneficiary’s assets are too high, and get kicked
off of “Needs-Based” programs- May have to PAY BACK Medicaid, other programs
The GOOD News…
There are solutions for you and your family!
To save money AND receive benefits
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Trusts: Who is Involved?Assets owned by Trust pass Outside of Probate
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“Inter Vivos” v. Testamentary Trusts
Testamentary Trusts Created by your Will Only effective once your Will is effective (I.e.
death) No good for your benefit(you’re dead)
Inter Vivos Trusts Created during your life May be used for your benefit
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For 3rd Party Money (Ex: Parent’s $) Inter Vivos Supplementary Needs Trusts Testamentary SNTs (in Will)
For 1st Party Money (the Recipient’s $) Medicaid Asset Trusts (usually for large assets) Pooled Trusts (payback provisions apply) Inter Vivos SNTs (payback provisions apply)
Promissory Notes (protects 40%-45%)
Strategies
Supplemental Needs Trusts
Money in an SNT is EXCLUDED as an asset for Medicaid and SSI purposes!
Money held in trust can be used for: Food, clothing, education, vacation, television,
charge card, car, home, FUN STUFF
Cannot be used for: Gifts to others, cash to beneficiary, alcohol,
tobacco, firearms
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1st Party SNTs: Medicaid Recipient’s Money
3rd Party SNTs: Non-Medicaid Recipient’s
Money
SNTs: 1st Party v. 3rd Party
1st Party SNT The beneficiary’s money Any remaining money first goes to pay back govt Created with help of a parent, grandparent, guardian
or court order
3rd Party SNT A 3rd Party’s money – NEVER the beneficiary’s money Remaining money goes where creator decides Anyone can create for someone else
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Medicaid Homestead Exemptions
– For Siblings and ChildrenThe following family arrangements avoid a
Medicaid Lien on the primary residence:Sibling Caretakers – 1 year exemption
MUST live in same house
Children Caretakers – 2 year exemption MUST live in same house
Disabled Parent & Child both on Medicaid MUST live in same house
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Created by Medicaid recipient and/or spouse Meant to protect ASSETS, NOT INCOME
Illiquid, non income-generating assets placed in the Trust, such as real estate, or…
…Income generating assets can be placed in Trust and income withdrawn
Income could disqualify recipient for Medicaid due to income limits
5 Year Look Back applies for Institutional Care Child cannot evict parents from house, and cannot take
assets from Trust while parent(s) are alive
Medicaid Asset Protection Trusts
MAPT: Medicaid Recipient’s Money
The “Community Spouse” is entitled to some assets and income, but they are limited
If spouse is in a Nursing Home: $3,022.50 of income per month $74,180 - $120,900 of resources
If s spouses have Home Care: Combined income of $1,192 per month
During the Medicaid Application process the well spouse may exercise a “Spousal Refusal” to avoid inclusion of his/her assets and income Medicaid may accept this (varies county to county), but will have a claim
against the well spouse when he/she dies
New “Spousal Impoverishment” rules avoid liens
What About the “Well” Spouse?
Putting It All Together32
A Certified Financial PlannerTM is a trained financial professional required to meet certain Experience, Examination, Education and Ethical standards.
They are trained in the financial planning process and bring together multiple components of your financial lives (Ex: estate planning, retirement planning, risk management, investment management, etc.)
Daniel Timins, [email protected] Madison Avenue, Suite 240New York, NY 10022(212) 683-3560
Questions & Answers33
For more information about the Financial Planning Association of New York visit www.fpany.org.